July 16, 2018

Broker's Motion for Summary Judgment on Negligence Claim Denied

After being sued for negligence for failing to secure proper coverage, the broker was unsuccessful in seeking dismissal by way of summary judgment. Liverman Metal Recycling, Inc. v. Arthur J. Gallagher & Co., 2018 U.S. Dist. LEXIS 87957 (E.D. N.C. May 25, 2018).

Plaintiffs were two companies, Empire and Liverman, that processed scrap metal. They were in the process of merging under a management plan by which Empire would acquire Liverman. As part of the plan, Empire's employees were moved on to Liverman's payroll processing system. Concurrently, Liverman renewed its workmen's compensation policy. Defendant Arthur J. Gallagher & Company, an insurance broker, handled the renewal with the insurer, Bridgefield Insurance Company.

An employee suffered an onsite injury and filed a claim for workmen's compensation. Bridgefield denied the claim because the injured employee worked for Empire and the policy only covered Liverman. Plaintiffs brought the case to the North Carolina Industrial Commission. The Commission found that Bridgefield owed coverage. The Commission further found that Gallagher, acting as Bridgefield's agent, had knowledge of the merger. That knowledge was imputed to Bridgefield and it was therefore required to pay the coverage.

Liverman and Empire then sued Gallagher for the fees incurred before the Commission, contending that Gallagher's actions caused Bridgefield to wrongly disclaim coverage, leading to the proceeding before the Commission. Gallagher moved for summary judgment.

The court first rejected Gallagher's proximate cause argument. Gallagher argued that it did not cause injury because Bridgefield's denial of the workmen's compensation claim was not wrongful. Bridgefield evaluated the claim, determined that the injured employee was not a covered employee, and denied the claim. The inquiry, however, was not whether what Bridgefield did was reasonable, but why it was done.

Gallagher next argued it did not breach its duties as an insurance broker. The dispute here involved what was requested. Plaintiffs contended that they told Gallagher's agent about the transaction between Liverman and Empire. But whether the discussion was an affirmative representation that the requested insurance had been procured was not firmly established in any party's favor at this point. Therefore, the issue was not appropriate for summary judgment.

Lastly, plaintiffs alleged Gallagher had engaged in fraud and deceptive trade practices. Under North Carolina law, claims of fraud or deceptive trade practices required a showing of detrimental reliance. Plaintiffs argued they relied on the understanding that both Empire and Liverman employees in North Carolina were covered by the policy. Gallagher argued that its agent's communications did not constitute fraudulent misrepresentations or omissions such that plaintiffs' behavior was induced by Gallagher. But this had not yet been resolved, and summary judgment was premature.

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After being sued for negligence for failing to secure proper coverage, the broker was unsuccessful in seeking dismissal by way of summary judgment. Liverman Metal Recycling, Inc. v. Arthur J. Gallagher & Co., 2018 U.S. Dist. LEXIS 87957 (E.D. N.C. May 25, 2018).

Plaintiffs were two companies, Empire and Liverman, that processed scrap metal. They were in the process of merging under a management plan by which Empire would acquire Liverman. As part of the plan, Empire's employees were moved on to Liverman's payroll processing system. Concurrently, Liverman renewed its workmen's compensation policy. Defendant Arthur J. Gallagher & Company, an insurance broker, handled the renewal with the insurer, Bridgefield Insurance Company.

An employee suffered an onsite injury and filed a claim for workmen's compensation. Bridgefield denied the claim because the injured employee worked for Empire and the policy only covered Liverman. Plaintiffs brought the case to the North Carolina Industrial Commission. The Commission found that Bridgefield owed coverage. The Commission further found that Gallagher, acting as Bridgefield's agent, had knowledge of the merger. That knowledge was imputed to Bridgefield and it was therefore required to pay the coverage.

Liverman and Empire then sued Gallagher for the fees incurred before the Commission, contending that Gallagher's actions caused Bridgefield to wrongly disclaim coverage, leading to the proceeding before the Commission. Gallagher moved for summary judgment.

The court first rejected Gallagher's proximate cause argument. Gallagher argued that it did not cause injury because Bridgefield's denial of the workmen's compensation claim was not wrongful. Bridgefield evaluated the claim, determined that the injured employee was not a covered employee, and denied the claim. The inquiry, however, was not whether what Bridgefield did was reasonable, but why it was done.

Gallagher next argued it did not breach its duties as an insurance broker. The dispute here involved what was requested. Plaintiffs contended that they told Gallagher's agent about the transaction between Liverman and Empire. But whether the discussion was an affirmative representation that the requested insurance had been procured was not firmly established in any party's favor at this point. Therefore, the issue was not appropriate for summary judgment.

Lastly, plaintiffs alleged Gallagher had engaged in fraud and deceptive trade practices. Under North Carolina law, claims of fraud or deceptive trade practices required a showing of detrimental reliance. Plaintiffs argued they relied on the understanding that both Empire and Liverman employees in North Carolina were covered by the policy. Gallagher argued that its agent's communications did not constitute fraudulent misrepresentations or omissions such that plaintiffs' behavior was induced by Gallagher. But this had not yet been resolved, and summary judgment was premature.